FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(x) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission File No. 3-7662-NY
TELEWORLD ENTERPRISES, LTD.
(Exact name of small business issue as specified in Charter)
NEW YORK 11-2584617
(State or Other Jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
1313 Valwood Pkwy, Suite 370, Carrollton, Texas 75006
(Address of Principal executive office) (Zip code)
Registrant's telephone number, including area code: (214) 241-6454
Indicate by check whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
The number of shares outstanding of each of the issuer's classes of stock as
of the latest practicable date:
Class Outstanding at February 29, 1996
Common Stock, $.0001 Par Value 20,343,230 Shares
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF OPERATIONS 4
CONSOLIDATED STATEMENTS OF CASH FLOW 6
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
<PAGE>
TELEWORLD ENTERPRISED, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS February 29, May 31,
1996 1995
(Unaudited) (Audited)
Current Assets:
Cash $ 894 $ 21,027
Inventory 300,000 ----
Accounts Receivable, Trade 32,780 43,286
Accounts Receivable, Related Parties 15,692 11,776
Deposits 4,545 ----
Total Current Assets 353,911 76,089
Property and Equipment, at cost:
Construction - in progress 329,815 ----
Cable System 5,141,364 5,442,576
Furniture and Fixtures 314,569 319,945
Accumulated Depreciation (1,777,614) (1,180,042)
Net Property and Equipment 4,008,134 4,582,479
Total Assets $ 4,362,045 $ 4,658,568
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts Payable, Trade $ 335,481 $ 396,316
Accounts Payable, Related Parties 100,120 ----
Other Accrued Expenses 8,793 4,266
Total Current Liabilities 444,394 400,582
Stockholders' Equity:
Common stock - $.0001 par valur; authorized 50,000,000 shares;
issued and outstanding - 20,343,230 shares 1,834 1,754
Treasury stock (260) ----
Additional Paid-In-Capital 11,023,399 10,789,219
Accumulated Deficit (7,107,322) (6,532,987)
Total Stockholders' Equity 3,917,651 4,257,986
Total Liabilities and Stockholders' $ 4,362,045 $ 4,658,568
Equity
See accompanying notes to consolidated financial statements.
<PAGE> -3-
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
Feb. 29, 1996 Feb. 28, 1995
Revenue:
Subscription Revenue $ 54,772 $ 710,094
Management Fees & Other Income 1,740 (367,986)
Total Revenue 56,512 342,108
Operating Expenses:
Operating 20,994 85,216
General and Administrative 274,937 199,977
Depreciation 199,417 766
Total Operating Expenses 495,348 285,959
Income (Loss) From Operations (438,836) 56,149
Other Income (Expenses):
Interest Expense (2,100) (250,226)
Gain on Sale of Subsidiaries ---- ----
Total Other Income (Expenses) (2,100) (250,226)
Net Income (Loss) $ (440,936) $ 306,375
Net Income (Loss) Per Common Share $ (0.03) $ 0.05
Weighted Average Number of Common Shares 18,409,150 6,309,634
Outstanding
See accompanying notes to consolidated financial statements.
<PAGE> -4-
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
Feb. 29, 1996 Feb. 28, 1995
Revenue:
Subscription Revenue $ 191,692 $ 1,029,137
Management Fees & Other Income 1,740 ----
Total Revenue 193,432 1,029,137
Operating Expenses:
Operating 58,138 294,169
General and Administrative 417,980 632,691
Depreciation 598,251 2,298
Total Operating Expenses 1,074,369 929,158
Income (Loss) From Operations (880,937) 99,979
Other Income (Expenses):
Interest Expense (5,600) (187,414)
Gain on Sale of Subsidiaries 312,202 ----
Total Other Income (Expenses) 306,602 (187,414)
Net Income (Loss) $ (574,335) $ (87,435)
Net Income (Loss) Per Common Share $ (0.04) $ (0.01)
Weighted Average Number of Common Shares Outs 18,232,037 6,309,634
See accompanying notes to consolidated financial statements.
<PAGE> -5-
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
Feb. 29, 1996 Feb. 28, 1995
Cash Inflows(Outflows) From Operating Activities:
Loss From Operations $ (364,335) $ (87,435)
Adjustments to reconcile net loss to net cash
from operating activities:
Loss on Disposal of Furniture 8,947 ----
Depreciation 598,251 2,298
Net Change in Current Assets and Liabilities:
Deposits (4,545) ----
Accounts Receivable 6,590 (96,732)
Inventory 3,346 ----
Accounts Payable and Accrued Liabilities 43,812 183,993
Other Assets ---- (6,930)
Net assets form discontinued operations ---- 6,287
Cash provided (used) by operating activiti 292,066 1,481
Cash Flows from Investing Activities:
Issuance of Stock 24,000 ----
Purchase of Equipment (336,199) (1,656)
Net Cash Provided (used) by investing activities (312,199) (1,656)
Net Increase(Decrease) in Cash (20,133) (175)
Cash, Beginning 21,027 1,175
Cash, Ending $ 894 $ 1,000
See accompanying notes to consolidated financial statements.
<PAGE> -6-
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Three months ended February 29, 1996 and 1995
Note 1. Interim Consolidated Financial Statements
In the opinion of management, the accompanying consolidated financial
statements for the three months ended February 29, 1996 and 1995 reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operations, and cash flows
of Teleworld Enterprises, Ltd. and subsidiaries (the "Company") and include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany transactions and balances have been eliminated.
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1995, and filed with the Securities
and Exchange Commission. Certain reclassification and adjustments may have
been made to the financial statements for the comparative period of the prior
fiscal year to conform with the 1995 presentation. The results of operations
for the interim period are note necessarily indicative of the results to be
obtained for the entire year.
Note 2. Operations and Settlement Agreement
On August 9, 1994, the Company entered into a Compromise and Settlement
Agreement (the "Settlement Agreement") with Multifamily Cablevision, Inc.,
("MFC") and Communication Investment Corporation ("CIC") for the purpose of
forming a joint venture between the separate parties for pooling and selling
of cable passes owned by each of the respective entities. If accomplished,
the sale of all cable passes owned by the Company would involve a sales of
substantially all of the operating assets of the Company. Accordingly, as a
result of management's intent to sell substantially all of the Company's
operating assets, the Company originally accounted for its operations as
discontinued for the year ended May 31, 1994.
In July, 1994, the Company sold 6,202 of its cable passes to MFC per the
terms of the May, 1993 sales agreement between TWE and MFC. This transaction
left the Company with approximately 9,900 passes in operation. In the
opinion of management at the time, the number of passes remaining was not
large enough to operate at a profitable level. The decision was made to sell
the remaining operating assets (cable passes) and use the proceeds to move into
the construction and sales of cable television systems. Subsequently, the
Company's management changed their decision, began to accumulate more SMATV
systems and decided to continue in
<PAGE> - 7 -
their operation in the future. Accordingly, the Company has reclassified its
financial statements from those presented previously as discontinued
operations as of and for the year ended May 31, 1994. The Company provided
$150,000 during the year ended May 31, 1994 as a provision for operating
losses of discontinued business during the phase-out period. This amount has
been credited against the loss on cable systems and settlement of related
party claims in fiscal year 1995.
In an effort to avoid protracted litigation, the Company, MFC and CIC
entered into an agreement with a third party in which the third party
acquired certain of the disputed assets and the Company, MFC and CIC mutually
released each other from any prior liabilities or claims. As a result of the
agreement and to avoid further litigation, the Company was required to issue
10,000,000 shares of common stock in settlement of a claim and also was
required to cancel the outstanding preferred stock.
Note 3. Supplemental Operating and Cash Flow Information and Stockholders'
Equity
For the year ended May 31, 1995, the Company had the following non-cash
transactions:
Certain receivables and deposits were relinquished, obligations forgiven,
cable systems sold and 10,000,000 shares of common stock to be issued in
connection with a settlement with certain related parties.
The Company acquired cable systems and equipment from third parties for
754,334 shares of common stock to be issued valued at $2,263,000. The stock
was valued based on the value of the assets acquired.
In September 1995, the Company issued 479,262 shares of common stock
valued at $26,839 to three officers for services rendered.
In connection with the settlement agreement (Note 2), the Company
cancelled its preferred shares outstanding.
Note 4. Related Party Transactions
Foliage Plus, Inc. and CIC, through their former ownership of the
Company's convertible preferred stock, may have been considered related
parties. As explained in Note 2, the Company has had major transactions with
CIC and CIC related parties, MFC and FCMI. These transactions included CIC's
management of the Company's cable systems.
On November 1, 1993, Action (a wholly owned subsidiary) began the
management, administration and construction of all private cable television
systems owned by the Company and
<PAGE> - 8 -
its subsidiaries. These job functions had previously been performed by CIC.
As of May 31, 1995, there are no remaining contracts or agreements with any
related parties pertaining to the operation, administration of construction
of the Company's cable systems.
In June 1995, 200,000 shares of stock were sold to two directors for
$6,000 each.
In September 1995, the Company issued 479,262 shares of common stock,
valued at $26,839 to three officers for services rendered.
Note 5. Sale of Subsidiaries
On June 1, 1995, the Company sold its subsidiaries 18 GHz and Action to
CIC (a related party) for $10. Due to the net deficit position of these
subsidiaries, the sale resulted in a gain of approximately $312,000.
Approximately $205,000 of accounts payable for these subsidiaries were
assumed by the purchaser in the transaction.
Note 6. Construction in Process
The Company has entered into a construction contract in 1995 with CHM
Satellite Communications, Inc. to repair and refurbish the cable systems,
headends and equipment related to the passes the Company is currently
operating. The initial contract was for $300,000. The contract has been
substantially completed with some cost overruns approved by management. The
Company is considering an additional contract to further enhance the cable
systems.
Note 7. Subsequent Events
The Board of Directors approved the issue of 2,000,000 shares of
common stock for consulting services in connection with the S-8 filed
February 9, 1996 and for other consulting services performed for the Company
by outside consultants during the last year. The Board approved this
transaction on February 27, 1996 and it is recorded in the financial
statements at its estimated value of $210,000 at February 29, 1996. This
stock was issued in May 1996.
On May 6, 1996, the Company acquired Sky Cruise Limited, a foreign
entity for a $5,000,000 convertible note. Sky Cruise has internet rights in
Europe and will provide another source of revenue to the Company.
<PAGE> - 9 -
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(1) Results of Operations
Results of operations - Comparison of Three Months Ended February 29, 1996 :
Net income for the three-month period ending February 29, 1996 decreased
$747,311 over the comparable period ending February 29, 1995. The primary
reason for the decrease in the net income is due to the sale of cable systems
and the resulting decrease in revenues due to a lack of fees from the
management of the systems and a substantial increase in depreciation for the
period.
The three months ended February 29, 1996 generated revenues of
approximately $56,500 compared to revenues of $342,100 for the same period
ended February 29, 1995. This decrease of $285,600 is primarily due to the
sale of a majority of the cable systems in the fiscal year ended May 31, 1995.
Also, the Company increased general and administrative costs by
approximately $75,000 from approximately $200,000 for the three months ended
February 29, 1995 to approximately $275,000 for the comparable period in
1996. The reason was a decrease in activity during the period due to the
previous sale of some of the cable systems managed by the Company. Depre-
ciation and amortization increased significantly due to the additional
construction and upgrading of existing and newly acquired cable systems.
Total earnings per share decreased by $0.08 per share from a gain of $.05
per share for the three months ended February 29, 1995 to a net loss of
$0.03 per share for the three months ended February 29, 1996.
Results of Operations - Comparison of Nine Months Ended February 29, 1996 :
The net loss for the nine-month period ended February 29, 1996 increased
$486,900 over the comparable period ending February 29, 1995. The primary
reason for the increase in the net loss is due to the sale of cable systems
and the resulting decrease in revenues from a lack of fees for managing some
of the systems that were sold and an increase in depreciation of $595,953.
The six months ended February 29, 1996 generated revenues of
approximately $193,400 compared to revenues of $1,029,000 for the same
period ended February 29, 1995. This decrease of $835,600 is primarily due
to the sale of a majority of the cable systems in the fiscal year ended May
31, 1995.
<PAGE> - 10 -
Also, the Company decreased general and administrative costs by
approximately $214,700 from approximately $632,700 for the nine months ended
February 29, 1995 to approximately $148,000 for the comparable period in
1996. The reason for the decrease was a decrease in activity during the
period due to the previous sale of some of the cable systems managed by the
Company. Depreciation and amortization increased significantly due to the
additional construction and upgrading of existing and newly acquired cable
systems.
Total earnings per share decreased by $0.03 per share from a loss of
$.01 per share for the nine months ended February 29, 1995 to a net loss of
$0.04 per share for the nine months ended February 29, 1996.
(2) Liquidity
As of February 29, 1996, the Company has a negative working capital of
approximately $90,500, compared to a negative working capital as of May 31,
1995 of approximately $324,500. The improvement in the working capital
position relates principally to an increase in inventory. Accounts payable
to related parties at February 29, 1996 in the amount of approximately
$100,120 are not anticipated by management to be repaid in the foreseeable
future.
Management anticipates that the payment term structure of trade accounts
receivable will be sufficient to support the cash flow needs of the Company
for operational matters. The Company is planning to raise additional capital
($1,000,000) through a private placement of membership units in a joint
venture or by sale of its shares through a major investment banking firm.
A majority shareholder, First Capital, Inc. (FCI), has completed a give back
of sufficient share so that there will be no further dilution to the existing
shareholders by the issuance of shares required to raise the additional
capital. The additional capital will be used to provide financing necessary
to setup the Company as a provider on the Internet and to provide interactive
games for users of the Internet System.
During the third quarter the Company acquired, for a $5,000,000
convertible note, all of the assets of Sky Cruise Limited, a foreign company
that is setup on the "Internet" as a provider of web-page advertising
services on an interactive basis. The Company feels that this acquisition
will help the Company be competitive in the changing telecommunications
industry and believes that it will also provide additional revenues to be
utilized in the operations and growth of the Company.
<PAGE> - 11 -
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
<PAGE> - 12 -
TELEWORLD ENTERPRISES, LTD. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
dated: Dallas, Texas
July 1, 1996
TELEWORLD ENTERPRISES, LTD.
AND SUBSIDIARIES
BY: /s/ Dorothy Sivilli
DOROTHY SIVILLI, President
